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Insolvency and Bankruptcy - Law and Practice · Winding-Up by Tribunal

Investigation Proceedings During Winding Up under Section 226

Updated 11 October 2026 · Fact-checked

Under section 226 of the Companies Act, 2013, an investigation under Chapter XIV is not stopped or suspended only because a section 241 application is made, a special resolution for voluntary winding up is passed, or another winding up proceeding is pending before the Tribunal. Winding up and investigation run side by side.

Understand Investigation Proceedings During Winding Up

An investigation under the Companies Act looks into the affairs, membership or ownership of a company. Its purpose is to find out what went wrong and who is responsible. Winding up has a different purpose: to close the company, sell its assets and pay creditors.

A wrongdoer could try to use winding up as a shield. If the company is wound up, the inspector might be told to stop. Section 226 blocks this. It says an investigation may be initiated, and shall not be stopped or suspended by reason only of three facts.

The three facts are: (a) an application has been made under section 241 (oppression and mismanagement); (b) the company has passed a special resolution for voluntary winding up; or (c) any other proceeding for winding up is pending before the Tribunal.

There are two provisos. First, if the Tribunal passes a winding up order in a clause (c) proceeding, the inspector must inform the Tribunal that the investigation is pending, and the Tribunal passes such order as it deems fit. Second, nothing in the winding up order absolves any director or other employee from taking part in the proceedings before the inspector, or from any liability arising from the inspector's findings.

Related provisions show the same policy. Under section 282(3), where a fraud is reported in respect of a company being wound up, the Tribunal shall, without prejudice to the winding up, order an investigation under section 210. Section 218 protects employees during an investigation: the company must obtain Tribunal approval before discharging, punishing or worsening the terms of an employee.

Key rules to remember

Core rule of section 226
Investigation continues, and is not stopped or suspended by reason only of: (a) section 241 application; (b) special resolution for voluntary winding up; (c) any other winding up proceeding pending before the Tribunal
The words 'by reason only of' matter. The rule says these facts alone are no ground to stop an investigation.
First proviso
Winding up order passed in a clause (c) proceeding → inspector informs Tribunal of the pending investigation → Tribunal passes such order as it deems fit
The duty to inform lies on the inspector. The Tribunal decides what happens next.
Second proviso
Winding up order does not absolve any director or other employee from (i) participating before the inspector, or (ii) liability from the inspector's findings
Officers cannot refuse to cooperate by pointing to the winding up.
Fraud during winding up (section 282(3))
Report of fraud from Company Liquidator, Central Government or any person → Tribunal shall order investigation under section 210, without prejudice to winding up
Afterwards the Tribunal may pass orders and give directions under sections 339 to 342, or direct the Company Liquidator to file a criminal complaint.
Employee protection (section 218)
During investigation, to discharge, suspend, punish or worsen terms of an employee → obtain Tribunal approval; no objection within 30 days of application → may proceed
Appeal to the Appellate Tribunal within 30 days of receiving the Tribunal's objection notice.

How to solve Investigation Proceedings During Winding Up questions

Use this method for any case question on investigation and winding up.

  1. 1Identify the stage: has an investigation been ordered or started, and what is the winding up status (voluntary resolution, petition pending, or winding up order passed)?
  2. 2Name the provision: section 226 for continuation of the investigation, with section 282(3) if fraud is reported during winding up.
  3. 3Match the facts to clause (a), (b) or (c) of section 226 and quote the phrase 'by reason only of'.
  4. 4If a winding up order has been passed, apply the first proviso: the inspector informs the Tribunal, and the Tribunal passes such order as it deems fit.
  5. 5Apply the second proviso to the directors or employees: they must still take part in the investigation and remain liable for the findings.
  6. 6Check for any employee action proposed during the investigation and apply section 218 (Tribunal approval).
  7. 7Conclude clearly: the investigation continues, with the practical consequence for the company and its officers.

Quickest way: Three-line answer for section 226 questions

When to use it: Use when time is short and the question simply asks whether winding up stops an investigation.

  1. Rule: investigation is not stopped or suspended by reason only of a section 241 application, voluntary winding up resolution or pending winding up proceeding.
  2. Add the provisos: inspector informs the Tribunal after a winding up order; directors and employees stay bound to participate and stay liable.
  3. Conclude on the facts: the investigation continues.

Common mistakes in Investigation Proceedings During Winding Up

  • Writing that winding up automatically ends the investigation.

    Students assume a closed company has nothing left to investigate.

    Fix: Remember the purpose is to fix responsibility. Section 226 says the investigation is not stopped or suspended by these facts alone.

  • Dropping the words 'by reason only of'.

    Students memorise the three clauses but not the wording of the test.

    Fix: Quote the phrase. It means these facts alone are not a ground to stop; it does not remove the Tribunal's powers under the first proviso.

  • Saying the Tribunal must stop the investigation after a winding up order.

    Confusion about the first proviso.

    Fix: The inspector informs the Tribunal and the Tribunal passes such order as it deems fit. Nothing says the investigation must end.

  • Claiming directors are relieved of liability once a winding up order is made.

    Students link winding up with the end of the company's affairs.

    Fix: The second proviso says the order does not absolve any director or other employee from participating or from liability as a result of the inspector's findings.

  • Citing sections 308, 309 or 323 as the current law on voluntary winding up.

    Older material still refers to the earlier voluntary winding up provisions of the 2013 Act.

    Fix: These sections, and section 314, are omitted with effect from 15-11-2016. Voluntary liquidation of a company is now governed by the IBC, section 59.

Worked examples

Example 1

Mehta Textiles Ltd, a company in Surat, is under investigation ordered under Chapter XIV. Before the inspector finishes, the members pass a special resolution for voluntary winding up. The directors write to the inspector that the investigation must now stop. Advise.

Show the solution
  1. Provision: section 226 of the Companies Act, 2013.
  2. Facts: an investigation is pending and a special resolution for voluntary winding up has been passed. This is clause (b).
  3. Rule: no investigation shall be stopped or suspended by reason only of such a resolution.
  4. Application: the resolution alone gives no ground to stop the inspector.
  5. Directors: the second proviso keeps directors and employees bound to participate and liable for the inspector's findings.

Answer: The directors are wrong. The investigation continues despite the special resolution for voluntary winding up, and the directors must cooperate with the inspector.

Example 2

A petition to wind up Kaveri Agro Ltd is pending before the Tribunal. An investigation into its affairs is under way. The Tribunal passes a winding up order. What must the inspector do, and are the directors released from the investigation?

Show the solution
  1. Provision: section 226 and its provisos.
  2. The pending winding up petition is clause (c), so its pendency did not stop the investigation.
  3. The Tribunal has now passed a winding up order, so the first proviso applies: the inspector shall inform the Tribunal about the pendency of the investigation.
  4. The Tribunal then passes such order as it may deem fit.
  5. Under the second proviso, the winding up order does not absolve any director or other employee from participating before the inspector or from liability resulting from the findings.

Answer: The inspector must inform the Tribunal of the pending investigation, and the Tribunal will pass such order as it deems fit. The directors are not released; they must participate and remain liable for the inspector's findings.

Exam tips

  • Quote the three triggers of section 226 in order (a), (b), (c), and use the words 'by reason only of'.
  • Always mention both provisos in a case answer; marks are often tied to the inspector informing the Tribunal and to the directors' continuing liability.
  • Link with section 282(3) when the facts mention fraud reported to the Tribunal during liquidation.
  • Do not rely on omitted sections 308, 309, 314 or 323 for voluntary winding up; note they are omitted and refer to the IBC.
  • End each answer with a one-line conclusion on whether the investigation continues.

Practice questions from Winding-Up by Tribunal

Investigation Proceedings During Winding Up in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Investigation Proceedings During Winding Up: frequently asked questions

Does winding up stop investigation proceedings against a company?

No. Section 226 says an investigation is not stopped or suspended by reason only of a section 241 application, a special resolution for voluntary winding up, or another winding up proceeding pending before the Tribunal.

What happens if the Tribunal passes a winding up order during an investigation?

The inspector must inform the Tribunal about the pending investigation. The Tribunal then passes such order as it may deem fit.

Can directors avoid the inspector after a winding up order?

No. Nothing in the winding up order absolves any director or other employee from participating in the proceedings before the inspector, or from liability arising from the inspector's findings.

Can the Tribunal order an investigation after winding up has begun?

Yes. Under section 282(3), if a fraud in respect of the company is reported by the Company Liquidator, the Central Government or any person, the Tribunal shall order an investigation under section 210, without prejudice to the winding up.